PERSPECTIVES

Professor Nawal Taneja knows airlines well—but make sure his plane
arrives on time

Get a front row seat to the future of the airline industry.

You have over 45 years of experience in this sector. How did you first get interested in it?

Like so many people who are passionate about this industry, it all started with my fascination with the aircraft itself.

I was trained as an aeronautical engineer, so I understand the physics of flight. But it always amazed me how these massive planes can take off into the air. It’s incredible to me, even today.

I also became interested in the management aspect of the airline industry. The challenge that airlines have of managing fixed supply and variable demand is fascinating. I’m also intrigued by the pure complexity of this industry that is labor, capital and fuel intensive, a rare combination.

What are the most profound industry changes you have seen over the years?

I’ve seen many, but let me focus on three. First, there are developments related to the aircraft themselves that changed the game. When the B707 came out in the late 1950s, it transformed transoceanic travel time. The A380 disrupted seat mile costs. And I could go on, for example, with the advanced regional aircraft.

Second, I can point to the development of low-cost carriers. Today, about 30 percent of seats are sold by low-cost carriers. Not only are they competing with full service carriers, but they’ve brought air travel to people and places where it did not exist before.

And lastly, I’ve seen big changes in management capabilities in this industry that get overlooked. For example, airlines aren’t given enough credit for having begun sharing economy practices—think code sharing—long before the sharing economy even existed.

Why did you want to write a book about disruptive innovation in the airline industry?

Think about how disruptive innovation is changing so many industries.

Before the Apple iPod, people had to go the store, buy a CD with 10 songs on it, and load it into a CD player to listen. But now, people can download one specific song and listen to it essentially anywhere and anytime. Netflix has done the same thing with movies and television shows.

And have you heard what Google is doing with the self-driving car? It’s only a few years away. It’s been driven one million miles with only about a dozen minor fender benders. When it arrives, it will change so much, including the airline industry. The implications are mind boggling.

Disruptions like these got me thinking about what it will all mean for this industry. Also, my conversations with senior airline executives, leaders in related businesses and government policy makers confirmed that disruptive innovation is a top-of-mind topic.

Do most people think of the airline industry as disruptive?

I think it’s mixed. Some people think that airlines simply fly people from airport to airport—even jetway to jetway—and don’t care about what happens before or after.

Other people have a completely different perspective. They see airlines innovating in a variety of ways, from expanding routes to improving the customer experience. That might be introducing more comfortable seat choices or providing experiences that drive social media buzz.

Do airlines recognize the importance of disruptive innovation?

They clearly recognize it. But the degree of reaction varies. Some airlines are moving forward with business as usual.

Others are going to completely change how they operate. These carriers will segment the market and provide relevant value propositions. The transformation strategies require a mindset to deal with the legacy systems, processes and workforce, and to leverage emerging technologies.

What’s at stake for them if airlines don’t innovate today?

Airlines that don’t transform will exit the market by going bankrupt. Some might get acquired. Still others will become irrelevant. They’ll remain in the market, but competitors won’t see them as a threat, and consumers will be neutral to them at best.

What are the biggest barriers to change for airlines?

The complexity of this industry is a huge barrier. There is a complex web of government regulation, security issues, airport congestion and air traffic control issues that airlines have to manage through.

Airlines have also been limited by decades old legacy technology systems that were not designed for the realities of air travel today. And I hate to say it, but legacy mindsets can be a challenge too.

What disruptive trends intrigue you the most—and why?

Let me explore three of them. First, I believe that the Airbus A321neoLR will be a game changer. It’s a smaller airplane—about 150 seats—that can fly 4,000 nautical miles nonstop. Boeing is developing a similar plane, the B737MAX. These could open up new routes from major cities to smaller cities.

I’m also tracking the evolution of mobile devices. They have given travelers a whole new level of information, transparency and control. Leading airlines are working on technology that will allow passengers to complete the self reaccommodation process when a flight is delayed or canceled all from their mobile device.

I also think that the role of social media in influencing brand reputation and passenger preference is fascinating. More and more, people are looking to social media—to user generated content—to get information from people whom they trust and respect.

Why are customers such a disruptive force for the industry?

I can answer that very simply. The power has shifted from airlines to customers, from providers to receivers.

How are new intermediaries pushing airlines to disruptive innovation?

They play a huge role. But which one? We know that they aren’t going to become airlines. The business is too complex, and it has traditionally been difficult for airlines to make profits until recently.

Instead, the new intermediaries are disrupting distribution. They have a 360-degree view of customers in a way that airlines cannot—at least today. With deep customer data and analytics, they are targeting the management of customer relationships, working as facilitators of mobility.

Consider this scenario. You miss your connection on a flight to London. The airline books you on a flight the next day. And what happens in between is your problem.

But the intermediary books you on an earlier flight on a different airline, puts you up in an airport hotel for a half-day, and offers a deal on tickets to the theatre in London during your stay. This is facilitating mobility with rich customer information and analytics.

What will the air travel experience be like for customers in 10 years?

The forward thinkers will have a decision to make for the future.

They can’t be everything to everyone. They will need to segment their business, create and deliver an appropriate value proposition for that segment, build the brand and provide seamless service across alliance partnerships, all modes of transport, and at all touchpoints.

Do you fly often? What kind of air traveler are you?

Yes, I do fly often. And I may be an oddball. I don’t care about in-flight meals or entertainment. My top priority is on-time performance and nonstop flights.

What is your most memorable air travel experience?

Every time I’ve gotten to my destination on time!

I fill out surveys about what I think about the flight, and my rating is always about on-time performance. I have no other comments because nothing else matters to me.

There’s an important point in this. No traveler is the same. Airlines must understand people’s different needs and deliver on travelers’ stated and unstated needs. That’s the essence of disruptive innovation. Giving people something before they even know they want it.

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